The GM Bailout “Payback” in Prospective

The other day I heard a GM commercial on the radio in which their CEO boasts about having “repaid our government loan, with interest, five years ahead of the original schedule.” Here’s a video version. But as Shikha Dalmia notes at Forbes, it’s still Government Motors. The U.S. gave GM $49.5B last year, ($6.7B of which was a loan at 7% interest) in exchange for a 60.8% equity stake. The still money-losing GM is paying back the loan using funds from the equity stake – not profits.  Clearly, GM is hoping to encourage those critical of the bailout to give it a second chance. But Dalmia argues that GM was motivated to pay back the $6.7B loan at 7% interest in hopes of bolstering its case for a $10B loan (at 5% interest) from the Department of Energy to retool plants in support of meeting fuel efficiency goals. And GM’s plans to payback the taxpayer largess through an IPO have been pushed back from the original target of late this year. The GAO reports “The Treasury is unlikely to recover the entirety of its investment in Chrysler or GM, given that the companies’ values would have to grow substantially more than they have in the past.” Reason.TV has a similar take on this.

Leave a comment

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.